A pandemic-tightened labor market has given willing and able workers more of an upper hand with their employers for the first time in generations. While workers are trying to take advantage of this rare moment of opportunity, economists are less convinced.
Worker power is the ability of an employee to command higher wages and benefits and set terms about their working conditions. Since the 1950s, worker power has generally been on the decline as the power of corporations and shareholders grew and union strength fell.
But now the nation has the most job openings it has ever had since the Bureau of Labor Statistics started tracking data in December 2000. There were 10.1 million job openings recorded at the end of June. That means that for every available 100 jobs, there are only 94 unemployed people available.
“We think of worker power as basically where the balance of power lies in the employment relationship between the employee and the worker,” said Anna Stansbury, a labor economist and assistant professor of work and organization studies at the MIT Sloan School of Management. “People might think, ‘How much leverage do I have to ask for a pay rise? Or to say no if my boss asked me to do something that I think is unsafe?’”
“To some extent, it’s a zero-sum game,” she added, meaning that “if one increases … the other declines.”
Leading into the pandemic, the labor force was already starting to favor workers.
“We had a tightening labor market before the crisis, and the war for talent was already picking up,” said Diane Swonk, chief economist at advisory firm Grant Thorton, in an email. “By both constraining supply and boosting demand, we have put the whole labor market on steroids.”
But the new power is unevenly distributed.
“Wage dynamic and worker power depends on which side of the labor shock you fall on,” said Anu Madgavkar, a partner with the McKinsey Global Institute.
While wage growth has benefited all workers, higher-skilled workers with technical skills that can be used remotely have gained more autonomy and market power and widened the geographic range of potential employers.
Unemployed workers in fields at greater risk of Covid-19 shutdowns that rely on in-person contact, like retail, restaurants, entertainment and travel, should focus on “future-proof” skills, analysts say. The top skills employees want now are in data literacy, understanding digital systems, adaptability, empathy and collaboration, according to research by McKinsey.
In this stronger labor market, often it’s up to workers to make the pivot. Ariana Garcia, 27, was furloughed and laid off from retail and beauty jobs twice in 2020 due to the pandemic. A single mother, she found herself on unemployment for the first time in her life and uncertain how she would make rent.
“I didn’t feel like going back to retail was necessarily the safest idea or the most stable,” Garcia said. She said she began to think about how she could leverage her people, problem-solving and computer skills.
Garcia got a school administrative assistant job and invested over $2,500 in getting her real estate license and signing on with a local brokerage. She still does some freelance work helping clients with their makeup on weekends.
She said her new work pays less, but it is steadier and offers better benefits. For the first time in her life, she said, she can say she doesn’t feel well and can’t come to work. Previously, her co-workers and managers would have offered her water, a brisk smile and encouraged her to “power through.”
Garcia said she thinks the new worker power is here to stay.
“I’m cool with going and working for 9 to 5. But does this 9 to 5 also work for me? Is it good for my mental? Does it pay me adequately? Do I have benefits to provide for my family?” Garcia said. “If it’s a workplace that’s not willing to provide that, we’re not going to work there.”
High-performing workers who can do their work by phones and computers have also been able to negotiate permanent relocations during the pandemic, affording them a lower cost of living and higher quality of life.
Tom Turnquist, 50, a hotel procurement salesman, convinced his employer to let him move from Colorado to Arizona, where he upgraded to a four-bedroom house with a yard.
He turned the time he gained from losing a commute and workplace distractions into higher productivity and sales. Three months after he made the move management was initially wary of, he got a call from the company owner, congratulating him on the great job he was doing.
“I think there’s maybe just an institutional frame of mind that management might have … that this is the way that it’s been for decades, where we all come into an office, and that’s how we perform our jobs and our work,” Turnquist said. “But I think, not only in my case, a lot of people in the last year and a half have proven that not only is remote work possible, it can be successful.”
There is a split in the marketplace as higher-skilled workers reap more benefits from the pandemic shift, while lower-skilled workers receive fewer, or even fall further behind, economic experts are finding.
“Measured by hourly wages, hourly worker ‘power’ has increased substantially,” said Daniel Alpert, a managing partner at Westwood Capital and a senior fellow in financial macroeconomics at Cornell Law School, in an email. “Measured by hours offered to hourly workers in the lower wage sectors such as leisure and hospitality, retail, not so much.”
“Restaurants, especially limited service and fast food, only want staff during busy hours, and run thin the rest of the time. That was not the case in the mid-20th century,” he said.
Connie Carbno, 56, is an unemployed fast-food worker in the small rural town in New Boston, Texas. She lost her job after her manager learned during the pandemic that they could get by with three employees instead of seven. Fast-food stores that have raised wages are 30 miles away, where she faces more competition for jobs.
“The main employer is Walmart, which is a fight to get into because they are the only company paying higher than minimum wage,” just $7.25 an hour, she said. “My bills have been paid ahead, but that’s coming to an end next month. So I hope I get a job ASAP.”
Some economists are skeptical that some of the newfound worker power is permanent. Worker protection policies, unions and norms of fairness haven’t strengthened much during the pandemic.
“We have a kind of very short-term tight labor market layered on top of still actually not a very tight labor market in a more systemic sense,” Stansbury said.
Other economists see long-term labor force headwinds playing in workers’ favor, like a swell of retiring baby boomers reducing worker supply. The hoped for “fall rush” of employees is likely to be a trickle, especially as delta concerns rise.
“The pandemic-related labor shortages won’t be resolved overnight, even when expanded unemployment benefits end,” said Julia Pollak, labor economist for job site ZipRecruiter, in an email. And employers requiring on-site workers will struggle as employees move to industries with more available remote jobs.
“The surprising development since the pandemic is not so much that we’re seeing a new power shift to workers,” she added, “but rather that the shift that was already underway has resumed and even accelerated.”